Everything you will want to know about Bankruptcy Notices

Everything you will want to know about Bankruptcy Notices

If you have been given a bankruptcy notice or court order you must take action right away to avoid future distress. Owing anyone money known here as a creditor, may be any individual or business to whom you owe money. If you’re unable to pay money to a creditor, the creditor will approach the Australian Financial Security Authority (AFSA) who will consequently deliver a bankruptcy notice demanding payment of that money.

Clearly, there is a limit to the amount of money owing to creditors before they can call the AFSA, and the minimum amount is $5,000. Soon after the creditor has received a final judgment, AFSA will issue you with a bankruptcy notice.

It’s vital that you take immediate action if you receive a bankruptcy notice from the AFSA. You will commit an ‘act of bankruptcy’ if you do not do any of the following:

Fulfill the bankruptcy notice in less than the requested timeframe specified on the notice (normally 21 days); or

Apply to the courts to request the bankruptcy notice be cancelled or set aside inside the timeframe mentioned on the notice (normally 21 days).

Committing an act of bankruptcy signifies that you give your creditor authorisation to apply to the Federal Circuit Court for a sequestration order, or in other words, an order that will make you lawfully bankrupt.

How does a Bankruptcy Notice get served to me?

A bankruptcy notice could be served to you in a variety of ways; it could be validly served to you directly, by normal post, or hand delivered to your registered address. In specific scenarios, a bankruptcy notice can be served digitally, either through email or fax.

If it’s not conceivable for a creditor to serve a bankruptcy notice using any of the above methods, a court order may be secured which allows creditors to serve the bankruptcy notice in a separate way.

I have a bankruptcy notice, now what?

To fulfill a bankruptcy notice, you must do one of three things:

1. You must pay in full the amount stated in the bankruptcy notice; or

2. Arrange an agreement with the creditor, for example a payment plan over a defined period. The creditor must accept the payment arrangements terms. It’s always encouraged that the agreement is made in writing so you have confirmation of the agreement.

3. Get some bankruptcy advice. At this point, you must not delay and get some guidance. If you have a notice of bankruptcy, just call us here at Bankruptcy Experts Cairns on 1300 795 575 for a Free Consultation.

It is very important to note that all of these actions must be taken inside the timeframe cited in the bankruptcy notice (usually 21 days from the date of the notice).

Can I get my Bankruptcy Set Aside?

If justified, you can apply to the court to have the bankruptcy notice cancelled or set aside. This must never be taken lightly though, since if there are unsatisfactory grounds to make an application then you will be under obligation to pay all the creditors legal fees which only increases the debt you owe to them.

If you do apply for your bankruptcy notice to be set aside, it’s always a smart idea to request that the court prolongs the timeframe for compliance with the bankruptcy notice, so you refrain from committing an act of bankruptcy while the court processes your application. Simply put, don’t leave it to the eleventh hour.

To have your bankruptcy notice set aside, one of the following conditions must apply:

1. The debt claimed on the bankruptcy notice does not exist;

2. There is a defect in the bankruptcy notice;

3. You have grounds for a counter-claim, cross demand, or set-off, equal to or exceeding the level of debt issued in the bankruptcy notice; or

4. The bankruptcy notice is an abuse of process.

What if the debt claimed on the bankruptcy notice does not exist?

To prove that the debt claimed on your bankruptcy notice does not exist, you will need to supply evidence that:

You have in fact paid the creditor the amount owing under the order or judgement; or

You have appealed the order by commencing proceedings to set aside the order or judgement.

In your application to set aside the bankruptcy notice, you can not simply say that you have a convincing argument to do so. You must have already filed the appropriate documents with the court that handed down the order. Furthermore, you must be able to present evidence to the Federal Circuit Court that shows that you have a legitimate case for grounds of appeal.

Moreover, if you do not start the process of setting aside the judgement or order prior to filing your application to set aside the bankruptcy notice, the Federal Circuit Court will not have the capacity to increase the timeframe for compliance under sections 41( 6A) and 41( 6C) of the Act. For that reason, you will have committed an act of bankruptcy.

What is a Defective Bankruptcy Notice?

A defect in the form or content of the bankruptcy notice happens when the creditor has failed to fulfill the requirements of the Act, in which case you may have grounds to request the bankruptcy notice to be set aside. Some defects are more arduous than others, and not all defects will make a bankruptcy notice invalid as these defects can be remedied at the discretion of the court under s 306( 1) of the Act.

In most cases, the defect must be significant or induce confusion over the actions you must take to comply with the bankruptcy notice for you to have the capacity to set aside the bankruptcy notice.

There are some fundamental requirements of a bankruptcy notice and if these requirements aren’t met, the bankruptcy notice will subsequently be void. The following lists some examples where these essential requirements have not been met:

The creditor’s address on the bankruptcy notice must make it reasonably practicable for the debtor to make payment (e.g. PO Boxes may not be suitable);.

The creditor’s and debtor’s name on the bankruptcy notice must match the creditor’s and debtor’s name in the order or judgement;.

Attached to the bankruptcy notice must be a copy of the judgement or order;.

It is a requirement that there is a timeframe for compliance included in the bankruptcy notice;.

If the creditor is claiming interest on the debt owed to them, the calculations must be outlined in an independent document attached to the notice; and.

If any part-payments made by the debtor, or any other allowed reductions, the total amount of these deductions must be cited in a separate document attached to the notice.

The following specifies some scenarios where bankruptcy notice defects have not been considerable enough to make them invalid:

Failure to include the ACN of the company who is the creditor; and.

The creditor’s address is listed as the address of their solicitors (assuming payment can be reasonably made to this address).

There are several other legal requirements that should be born in mind. These include:

The order or judgement must be at least $5,000, not including any post judgement interest being claimed by the creditor;

A bankruptcy notice can still be issued if the total amount is lower than $5,000, provided that the total amount was higher than $5,000 when the order or judgements were pronounced;

A bankruptcy notice must be formed on a final judgement or order that is presently owing to a creditor under s 40( 3) of the Act. A final judgement is defined as a judgement which finally disposes of the rights of the parties involved;

A bankruptcy notice must be served with six months of its issue. The only exception is if the Official Receiver (reg 4.02 A) has increased this timeframe;

The final order or judgement must not be stayed both at the time of issue of the notice and the time of its service. If a stay of execution is granted after service, it has no bearing on the bankruptcy notice;

An overstatement of the amount claimed to be owed to a creditor does not annul a bankruptcy notice, unless the debtor disputes the credibility of the notice inside the timeframe for compliance (s 41( 5)); and.

The order or judgment on which the bankruptcy notice is based can not be greater than 6 years old (s 41( 3)( c)).

Under what grounds could I counter-claim, set-off or cross demand?

To be successful using the grounds of counter-claim, set-off or cross demand, you will need to properly demonstrate to the court the following two items:

1. The counter-claim, set-off or cross demand is equal to or in excess of the total amount claimed by the creditor in the bankruptcy notice. You must also satisfy the court that these claims are legitimate and have a realistic possibility of succeeding; and.

2. The counter-claim, set-off or cross demand was not set up in the proceeding where the creditor attained the judgement on which the bankruptcy notice is based upon. Failure to benefit from the opportunity to counter-claim, including any detrimental personal circumstances (for example lack of evidence or legal counsel), will not be adequate.

What is an Abuse of process?

An abuse of process occurs if you can demonstrate that the reasons behind the bankruptcy notice is to pressure you to pay a debt, instead of an honest effort by the creditor to invoke the court’s jurisdiction in regard to insolvency. If the former holds true, then you will have the opportunity to set aside the bankruptcy notice caused by an abuse of process. To succeed using these grounds, you will need to exhibit evidence of collateral purpose or inappropriate pressure.

What If I think I have grounds to act on one of these items above?

If you believe you have a case for one of the abovementioned reasons to contest your bankruptcy, you will need to get the following documents prepared, filed, and served so as to apply for your bankruptcy notice to be set aside:.

1. Application (Form B2); and.

2. Affidavit.

Application.

You can get the requirements for an application to set aside a bankruptcy notice in rule 3.02 of the Rules. You can either secure a final order or an interim order.

Final orders must specify the ideal outcome you want to receive and the legislative basis which the court can grant this decision. An example of a final order can be: “That bankruptcy notice (BN00231) issued on 15 June 2017, which was served to me on 1 July 2017, be set aside under section 30( 1) of the Bankruptcy Act 1966.” You would also have to supply a copy of the bankruptcy notice with your application.

However, an interim order should detail any outcomes you wish before the application is finally decided upon, and the legislative basis which the court can grant this decision. An example of an interim order can be: “The time for compliance with bankruptcy notice (BN00233) be lengthened up to and including 7 days after the outcome of this application by the Court under section 41( 6A) of the Bankruptcy Act 1966.”.

Affidavit.

If you elect to make an application, it must be accompanied by an affidavit which illustrates the grounds of your application coupled with the date the bankruptcy notice was served to you. If you’ve already made an application to set aside the judgement of the bankruptcy notice, a copy of this application/s also needs to be attached. It’s critical that your affidavit must adhere to rule 3.02 of the Rules, or else your application may be declined and your request for an extension of time to adhere to the bankruptcy notice may not be approved.

Filing your application.

Once your documents are finished, they will need to be filed with the courts either online or face to face at the Federal Circuit Court Registry.

There is a lodging charge that will need to be paid, however in various circumstances you can apply for a waiver of this fee.

Serving your documents.

Once you’ve lodged your application and affidavit and they have been stamped, you must personally serve these documents to the creditor within 3 days after the documents have been filed.

If you are an individual, you must personally take the documents to the person identified on the document and hand it to them. If they choose not to receive the documents, the person serving them may place the document in the presence of the person to be served and verbally inform the person what the documents consist of.

If you are a business, you must personally go to a registered office of the business and hand the documents to a person servicing that organisation. You don’t have to deliver the documents to the businesses principal place of business, the Australian Securities and Investment Commission (ASIC) will supply you with a list of that company’s registered addresses.

If you would prefer someone else to serve the documents, you can get a bailiff of the court or a process server to serve the documents for a cost.

Financial Advice.

If you’re not satisfied whether you have grounds to set aside the bankruptcy notice, or you’re skeptical whether you should devote the time and money to apply as a result of financial reasons, contact Bankruptcy Experts Cairns on 1300 795 575 for free advice. Alternatively, you can visit our website for additional information: www.bankruptcyexpertscairns.com.au

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What you MUST know before You declare yourself BANKRUPT

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